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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2019
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
__________
to
__________
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Texas
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74-1488375
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(State or other jurisdiction of incorporation or organization)
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(I. R. S. employer identification number)
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1929 Allen Parkway, Houston, Texas
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77019
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(Address of principal executive offices)
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(Zip code)
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713-522-5141
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(Registrant’s telephone number, including area code)
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||
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None
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(Former name, former address, or former fiscal year, if changed since last report)
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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(Do not check if smaller reporting company)
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Page
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Three Months Ended
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||||||
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March 31,
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||||||
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2019
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2018
|
||||
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(In thousands, except per share amounts)
|
||||||
Revenue:
|
|
|
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||||
Property and merchandise revenue
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$
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381,209
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$
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368,214
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Service revenue
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355,371
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378,098
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Other revenue
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61,632
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48,170
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Total revenue
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798,212
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794,482
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||
Costs and expenses:
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||||
Cost of property and merchandise
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(197,894
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)
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(187,723
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)
|
||
Cost of service
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(190,813
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)
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(190,848
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)
|
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Overhead and other expenses
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(217,671
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)
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(220,149
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)
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Total costs and expenses
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(606,378
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)
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(598,720
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)
|
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Operating profit
|
191,834
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|
195,762
|
|
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General and administrative expenses
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(42,530
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)
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(34,784
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)
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||
(Losses) gains on divestitures and impairment charges, net
|
(1,878
|
)
|
|
482
|
|
||
Hurricane (expenses) recoveries, net
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(448
|
)
|
|
2,232
|
|
||
Operating income
|
146,978
|
|
|
163,692
|
|
||
Interest expense
|
(47,390
|
)
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|
(43,576
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)
|
||
Loss on early extinguishment of debt, net
|
—
|
|
|
(10,131
|
)
|
||
Other income, net
|
720
|
|
|
384
|
|
||
Income before income taxes
|
100,308
|
|
|
110,369
|
|
||
Provision for income taxes
|
(21,095
|
)
|
|
(28,321
|
)
|
||
Net income
|
79,213
|
|
|
82,048
|
|
||
Net income (loss) attributable to noncontrolling interests
|
110
|
|
|
(60
|
)
|
||
Net income attributable to common stockholders
|
$
|
79,323
|
|
|
$
|
81,988
|
|
Basic earnings per share:
|
|
|
|
||||
Net income attributable to common stockholders
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$
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0.44
|
|
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$
|
0.44
|
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Basic weighted average number of shares
|
181,696
|
|
|
185,130
|
|
||
Diluted earnings per share:
|
|
|
|
||||
Net income attributable to common stockholders
|
$
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0.43
|
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$
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0.43
|
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Diluted weighted average number of shares
|
185,317
|
|
|
189,923
|
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Three Months Ended
|
||||||
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March 31,
|
||||||
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2019
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2018
|
||||
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(In thousands)
|
||||||
Net income
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$
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79,213
|
|
|
$
|
82,048
|
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Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustments
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7,401
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(9,592
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)
|
||
Total comprehensive income
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86,614
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|
72,456
|
|
||
Total comprehensive income attributable to noncontrolling interests
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(40
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)
|
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(57
|
)
|
||
Total comprehensive income attributable to common stockholders
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$
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86,574
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|
|
$
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72,399
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March 31, 2019
|
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December 31, 2018
|
||||
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(In thousands, except share amounts)
|
||||||
ASSETS
|
|
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|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
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$
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153,694
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|
$
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198,850
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Receivables, net
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81,811
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73,825
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Inventories
|
25,219
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24,950
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||
Other
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29,328
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33,607
|
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||
Total current assets
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290,052
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|
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331,232
|
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||
Preneed receivables, net and trust investments
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4,498,502
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4,271,392
|
|
||
Cemetery property
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1,840,782
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1,837,464
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|
||
Property and equipment, net
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1,993,346
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1,977,364
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Goodwill
|
1,859,194
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1,863,842
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|
||
Deferred charges and other assets
|
1,023,282
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934,151
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Cemetery perpetual care trust investments
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1,573,903
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1,477,798
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||
Total assets
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$
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13,079,061
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$
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12,693,243
|
|
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|
||||
LIABILITIES & EQUITY
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|
||||
Current liabilities:
|
|
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|
||||
Accounts payable and accrued liabilities
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$
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520,187
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$
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479,768
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Current maturities of long-term debt
|
68,554
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69,896
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|
||
Income taxes payable
|
15,802
|
|
|
5,936
|
|
||
Total current liabilities
|
604,543
|
|
|
555,600
|
|
||
Long-term debt
|
3,409,196
|
|
|
3,532,182
|
|
||
Deferred revenue, net
|
1,431,389
|
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1,418,814
|
|
||
Deferred tax liability
|
408,323
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|
|
404,627
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|
||
Other liabilities
|
359,318
|
|
|
297,302
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|
||
Deferred receipts held in trust
|
3,598,213
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3,371,738
|
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Care trusts’ corpus
|
1,567,674
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1,471,165
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|
||
Commitments and contingencies (Note 10)
|
|
|
|
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|
||
Equity:
|
|
|
|
||||
Common stock, $1 per share par value, 500,000,000 shares authorized, 185,855,605 and 192,428,122 shares issued, respectively, and 182,250,721 and 181,470,582 shares outstanding, respectively
|
182,251
|
|
|
181,471
|
|
||
Capital in excess of par value
|
988,978
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|
|
972,710
|
|
||
Retained earnings
|
508,578
|
|
|
474,327
|
|
||
Accumulated other comprehensive income
|
20,646
|
|
|
13,395
|
|
||
Total common stockholders’ equity
|
1,700,453
|
|
|
1,641,903
|
|
||
Noncontrolling interests
|
(48
|
)
|
|
(88
|
)
|
||
Total equity
|
1,700,405
|
|
|
1,641,815
|
|
||
Total liabilities and equity
|
$
|
13,079,061
|
|
|
$
|
12,693,243
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
79,213
|
|
|
$
|
82,048
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
10,131
|
|
||
Depreciation and amortization
|
37,126
|
|
|
38,981
|
|
||
Amortization of intangibles
|
7,066
|
|
|
7,103
|
|
||
Amortization of cemetery property
|
15,723
|
|
|
12,825
|
|
||
Amortization of loan costs
|
1,620
|
|
|
1,518
|
|
||
Provision for doubtful accounts
|
1,917
|
|
|
2,158
|
|
||
Provision for (benefit from) deferred income taxes
|
2,492
|
|
|
(1,692
|
)
|
||
Gains (losses) on divestitures and impairment charges, net
|
1,878
|
|
|
(482
|
)
|
||
Share-based compensation
|
4,568
|
|
|
3,699
|
|
||
Change in assets and liabilities, net of effects from acquisitions and divestitures:
|
|
|
|
||||
(Increase) decrease in receivables
|
(8,716
|
)
|
|
11,587
|
|
||
Increase in other assets
|
(13,180
|
)
|
|
(6,685
|
)
|
||
Increase in payables and other liabilities
|
29,545
|
|
|
20,486
|
|
||
Effect of preneed sales production and maturities:
|
|
|
|
||||
Decrease in preneed receivables, net and trust investments
|
7,983
|
|
|
9,742
|
|
||
Increase in deferred revenue, net
|
30,392
|
|
|
16,550
|
|
||
(Decrease) increase in deferred receipts held in trust
|
(12,731
|
)
|
|
3,489
|
|
||
Net cash provided by operating activities
|
184,896
|
|
|
211,458
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(51,573
|
)
|
|
(46,241
|
)
|
||
Acquisitions, net of cash acquired
|
(19,240
|
)
|
|
(33,934
|
)
|
||
Proceeds from divestitures and sales of property and equipment
|
7,764
|
|
|
6,452
|
|
||
Payments on Company-owned life insurance policies
|
(7,891
|
)
|
|
(9,246
|
)
|
||
Proceeds from Company-owned life insurance policies
|
—
|
|
|
2,810
|
|
||
Other
|
—
|
|
|
70
|
|
||
Net cash used in investing activities
|
(70,940
|
)
|
|
(80,089
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of long-term debt
|
15,000
|
|
|
185,000
|
|
||
Scheduled payments of debt
|
(8,535
|
)
|
|
(8,535
|
)
|
||
Early payments of debt
|
(135,000
|
)
|
|
(259,594
|
)
|
||
Principal payments on finance leases
|
(10,657
|
)
|
|
(7,646
|
)
|
||
Proceeds from exercise of stock options
|
15,962
|
|
|
4,989
|
|
||
Purchase of Company common stock
|
(14,542
|
)
|
|
(118,797
|
)
|
||
Payments of dividends
|
(32,820
|
)
|
|
(31,348
|
)
|
||
Bank overdrafts and other
|
7,906
|
|
|
(7,574
|
)
|
||
Net cash used in financing activities
|
(162,686
|
)
|
|
(243,505
|
)
|
||
Effect of foreign currency on cash, cash equivalents, and restricted cash
|
1,540
|
|
|
(1,145
|
)
|
||
Net decrease in cash, cash equivalents, and restricted cash
|
(47,190
|
)
|
|
(113,281
|
)
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
207,584
|
|
|
340,601
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
160,394
|
|
|
$
|
227,320
|
|
|
Common
Stock
|
|
Treasury Stock
|
|
Capital in
Excess of
Par Value
|
|
Retained Earnings
|
|
Accumulated
Other
Comprehensive
Income
|
|
Noncontrolling
Interests
|
|
Total
|
||||||||||||||
Balance at December 31, 2017
|
$
|
191,936
|
|
|
$
|
(5,321
|
)
|
|
$
|
970,468
|
|
|
$
|
210,364
|
|
|
$
|
41,943
|
|
|
$
|
47
|
|
|
$
|
1,409,437
|
|
Cumulative effect of accounting changes
|
—
|
|
|
—
|
|
|
—
|
|
|
172,461
|
|
|
(229
|
)
|
|
—
|
|
|
172,232
|
|
|||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
81,988
|
|
|
(9,589
|
)
|
|
57
|
|
|
72,456
|
|
|||||||
Dividends declared on common stock ($0.17 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,348
|
)
|
|
—
|
|
|
—
|
|
|
(31,348
|
)
|
|||||||
Employee share-based compensation earned
|
—
|
|
|
—
|
|
|
3,699
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,699
|
|
|||||||
Stock option exercises
|
282
|
|
|
—
|
|
|
4,707
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,989
|
|
|||||||
Restricted stock awards, net of forfeitures
|
163
|
|
|
—
|
|
|
(163
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Purchase of Company common stock
|
—
|
|
|
(3,095
|
)
|
|
(16,101
|
)
|
|
(99,601
|
)
|
|
—
|
|
|
—
|
|
|
(118,797
|
)
|
|||||||
Other
|
47
|
|
|
—
|
|
|
(866
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(819
|
)
|
|||||||
Balance at March 31, 2018
|
$
|
192,428
|
|
|
$
|
(8,416
|
)
|
|
$
|
961,744
|
|
|
$
|
333,864
|
|
|
$
|
32,125
|
|
|
$
|
104
|
|
|
$
|
1,511,849
|
|
|
Common
Stock
|
|
Treasury Stock
|
|
Capital in
Excess of
Par Value
|
|
Retained Earnings
|
|
Accumulated
Other
Comprehensive
Income
|
|
Noncontrolling
Interests
|
|
Total
|
||||||||||||||
Balance at December 31, 2018
|
$
|
184,721
|
|
|
$
|
(3,250
|
)
|
|
$
|
972,710
|
|
|
$
|
474,327
|
|
|
$
|
13,395
|
|
|
$
|
(88
|
)
|
|
$
|
1,641,815
|
|
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
79,323
|
|
|
7,251
|
|
|
40
|
|
|
86,614
|
|
|||||||
Dividends declared on common stock ($0.18 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,820
|
)
|
|
—
|
|
|
—
|
|
|
(32,820
|
)
|
|||||||
Employee share-based compensation earned
|
—
|
|
|
—
|
|
|
4,568
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,568
|
|
|||||||
Stock option exercises
|
950
|
|
|
—
|
|
|
15,012
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,962
|
|
|||||||
Restricted stock awards, net of forfeitures
|
126
|
|
|
—
|
|
|
(126
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Purchase of Company common stock
|
—
|
|
|
(355
|
)
|
|
(1,935
|
)
|
|
(12,252
|
)
|
|
—
|
|
|
—
|
|
|
(14,542
|
)
|
|||||||
Other
|
59
|
|
|
—
|
|
|
(1,251
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,192
|
)
|
|||||||
Balance at March 31, 2019
|
$
|
185,856
|
|
|
$
|
(3,605
|
)
|
|
$
|
988,978
|
|
|
$
|
508,578
|
|
|
$
|
20,646
|
|
|
$
|
(48
|
)
|
|
$
|
1,700,405
|
|
1.
|
Nature of Operations
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
Cash and cash equivalents
|
$
|
153,694
|
|
|
$
|
198,850
|
|
Restricted cash
(1)
:
|
|
|
|
||||
Included in
Other current assets
|
4,964
|
|
|
7,007
|
|
||
Included in
Deferred charges and other assets
|
1,736
|
|
|
1,727
|
|
||
Total restricted cash
|
6,700
|
|
|
8,734
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
160,394
|
|
|
$
|
207,584
|
|
(1)
|
Restricted cash in both periods primarily consists of proceeds from divestitures deposited into escrow accounts under IRS code section 1031 and collateralized obligations under certain insurance policies.
|
•
|
a
$0.7 million
reclass from
Other current assets
to
Accounts payable and accrued liabilities
for prepaid operating lease expenses,
|
•
|
a
$2.7 million
reclass from
Accounts payable and accrued liabilities
to
Deferred charges and other assets
for accrued operating lease expenses,
|
•
|
a
$62.6 million
increase to
Deferred charges and other assets
for operating lease right-of-use assets, and
|
•
|
a
$9.4 million
and
$53.2 million
increase to
Accounts payable and accrued liabilities
and
Other liabilities
, respectively, for operating lease liabilities.
|
•
|
whether a contract is or contains a lease,
|
•
|
lease classification, or
|
•
|
initial direct costs.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
Preneed funeral receivables
|
$
|
111,372
|
|
|
$
|
107,612
|
|
Preneed cemetery receivables
|
880,293
|
|
|
883,432
|
|
||
Preneed receivables from customers
|
991,665
|
|
|
991,044
|
|
||
Unearned finance charge
|
(44,699
|
)
|
|
(44,981
|
)
|
||
Allowance for cancellation
|
(49,102
|
)
|
|
(48,380
|
)
|
||
Preneed receivables, net
|
$
|
897,864
|
|
|
$
|
897,683
|
|
|
|
|
|
||||
Trust investments, at market
|
$
|
4,909,135
|
|
|
$
|
4,585,720
|
|
Insurance-backed fixed income securities and other
|
265,406
|
|
|
265,787
|
|
||
Trust investments
|
5,174,541
|
|
|
4,851,507
|
|
||
Less: Cemetery perpetual care trust investments
|
(1,573,903
|
)
|
|
(1,477,798
|
)
|
||
Preneed trust investments
|
$
|
3,600,638
|
|
|
$
|
3,373,709
|
|
|
|
|
|
||||
Preneed receivables, net and trust investments
|
$
|
4,498,502
|
|
|
$
|
4,271,392
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(In thousands)
|
||||||
Deposits
|
|
$
|
100,452
|
|
|
$
|
93,269
|
|
Withdrawals
|
|
$
|
107,356
|
|
|
$
|
106,769
|
|
Purchases of securities
|
|
$
|
446,761
|
|
|
$
|
599,651
|
|
Sales of securities
|
|
$
|
317,855
|
|
|
$
|
614,424
|
|
Realized gains
(1)
|
|
$
|
43,525
|
|
|
$
|
58,306
|
|
Realized losses
(1)
|
|
$
|
(32,631
|
)
|
|
$
|
(12,296
|
)
|
(1)
|
All realized gains and losses are recognized in
Other income
,
net
for our trust investments and are offset by a corresponding reclassification in
Other income
,
net
to
Deferred receipts held in trust
and
Care trusts' corpus.
|
|
March 31, 2019
|
||||||||||||||||
|
Value Hierarchy Level
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Value
|
||||||||
|
|
|
|
|
(In thousands)
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury
|
2
|
|
$
|
47,311
|
|
|
$
|
250
|
|
|
$
|
(291
|
)
|
|
$
|
47,270
|
|
Canadian government
|
2
|
|
45,738
|
|
|
73
|
|
|
(1,138
|
)
|
|
44,673
|
|
||||
Corporate
|
2
|
|
10,713
|
|
|
5
|
|
|
(256
|
)
|
|
10,462
|
|
||||
Residential mortgage-backed
|
2
|
|
3,127
|
|
|
6
|
|
|
(15
|
)
|
|
3,118
|
|
||||
Asset-backed
|
2
|
|
135
|
|
|
2
|
|
|
(9
|
)
|
|
128
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||
Preferred stock
|
2
|
|
6,086
|
|
|
496
|
|
|
(114
|
)
|
|
6,468
|
|
||||
Common stock:
|
|
|
|
|
|
|
|
|
|
||||||||
United States
|
1
|
|
1,283,369
|
|
|
237,651
|
|
|
(67,561
|
)
|
|
1,453,459
|
|
||||
Canada
|
1
|
|
36,092
|
|
|
9,614
|
|
|
(1,110
|
)
|
|
44,596
|
|
||||
Other international
|
1
|
|
79,441
|
|
|
14,482
|
|
|
(1,984
|
)
|
|
91,939
|
|
||||
Mutual funds:
|
|
|
|
|
|
|
|
|
|
||||||||
Equity
|
1
|
|
815,033
|
|
|
21,692
|
|
|
(87,972
|
)
|
|
748,753
|
|
||||
Fixed income
|
1
|
|
1,195,893
|
|
|
4,201
|
|
|
(45,751
|
)
|
|
1,154,343
|
|
||||
Other
|
3
|
|
6,706
|
|
|
402
|
|
|
—
|
|
|
7,108
|
|
||||
Trust investments, at fair value
|
|
|
3,529,644
|
|
|
288,874
|
|
|
(206,201
|
)
|
|
3,612,317
|
|
||||
Commingled funds
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed income
|
|
|
419,253
|
|
|
2,721
|
|
|
(9,559
|
)
|
|
412,415
|
|
||||
Equity
|
|
|
208,179
|
|
|
35,698
|
|
|
(305
|
)
|
|
243,572
|
|
||||
Money market funds
|
|
|
375,874
|
|
|
—
|
|
|
—
|
|
|
375,874
|
|
||||
Private equity
|
|
|
195,000
|
|
|
69,957
|
|
|
—
|
|
|
264,957
|
|
||||
Trust investments, at net asset value
|
|
|
1,198,306
|
|
|
108,376
|
|
|
(9,864
|
)
|
|
1,296,818
|
|
||||
Trust investments, at market
|
|
|
$
|
4,727,950
|
|
|
$
|
397,250
|
|
|
$
|
(216,065
|
)
|
|
$
|
4,909,135
|
|
|
December 31, 2018
|
||||||||||||||||
|
Value Hierarchy Level
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Value
|
||||||||
|
|
|
|
|
(In thousands)
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury
|
2
|
|
$
|
49,187
|
|
|
$
|
153
|
|
|
$
|
(448
|
)
|
|
$
|
48,892
|
|
Canadian government
|
2
|
|
56,343
|
|
|
23
|
|
|
(1,797
|
)
|
|
54,569
|
|
||||
Corporate
|
2
|
|
19,869
|
|
|
13
|
|
|
(516
|
)
|
|
19,366
|
|
||||
Residential mortgage-backed
|
2
|
|
3,611
|
|
|
10
|
|
|
(50
|
)
|
|
3,571
|
|
||||
Asset-backed
|
2
|
|
142
|
|
|
2
|
|
|
(11
|
)
|
|
133
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||
Preferred stock
|
2
|
|
9,058
|
|
|
180
|
|
|
(412
|
)
|
|
8,826
|
|
||||
Common stock:
|
|
|
|
|
|
|
|
|
|
||||||||
United States
|
1
|
|
1,236,513
|
|
|
149,233
|
|
|
(138,141
|
)
|
|
1,247,605
|
|
||||
Canada
|
1
|
|
34,821
|
|
|
9,082
|
|
|
(3,026
|
)
|
|
40,877
|
|
||||
Other international
|
1
|
|
77,676
|
|
|
6,057
|
|
|
(10,275
|
)
|
|
73,458
|
|
||||
Mutual funds:
|
|
|
|
|
|
|
|
|
|
||||||||
Equity
|
1
|
|
760,887
|
|
|
7,104
|
|
|
(151,853
|
)
|
|
616,138
|
|
||||
Fixed income
|
1
|
|
1,180,325
|
|
|
800
|
|
|
(89,179
|
)
|
|
1,091,946
|
|
||||
Other
|
3
|
|
6,548
|
|
|
3,210
|
|
|
(3
|
)
|
|
9,755
|
|
||||
Trust investments, at fair value
|
|
|
3,434,980
|
|
|
175,867
|
|
|
(395,711
|
)
|
|
3,215,136
|
|
||||
Commingled funds
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed income
|
|
|
419,206
|
|
|
2,419
|
|
|
(18,981
|
)
|
|
402,644
|
|
||||
Equity
|
|
|
205,789
|
|
|
19,567
|
|
|
(11,723
|
)
|
|
213,633
|
|
||||
Money market funds
|
|
|
466,429
|
|
|
—
|
|
|
—
|
|
|
466,429
|
|
||||
Private equity
|
|
|
215,618
|
|
|
72,897
|
|
|
(637
|
)
|
|
287,878
|
|
||||
Trust investments, at net asset value
|
|
|
1,307,042
|
|
|
94,883
|
|
|
(31,341
|
)
|
|
1,370,584
|
|
||||
Trust investments, at market
|
|
|
$
|
4,742,022
|
|
|
$
|
270,750
|
|
|
$
|
(427,052
|
)
|
|
$
|
4,585,720
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(In thousands)
|
||||||
Fair value, beginning balance
|
|
$
|
9,755
|
|
|
$
|
9,067
|
|
Net unrealized losses included in
Other income, net
(1)
|
|
(1,142
|
)
|
|
(534
|
)
|
||
Sales
|
|
(1,505
|
)
|
|
—
|
|
||
Fair value, ending balance
|
|
$
|
7,108
|
|
|
$
|
8,533
|
|
(1)
|
All net unrealized (losses) gains recognized in
Other income, net
for our trust investments are offset by a corresponding reclassification in
Other income, net
to
Deferred receipts held in trust
and
Care trusts' corpus
.
|
|
Fair Value
|
||
|
(In thousands)
|
||
Due in one year or less
|
$
|
51,407
|
|
Due in one to five years
|
45,592
|
|
|
Due in five to ten years
|
8,540
|
|
|
Thereafter
|
112
|
|
|
Total estimated maturities of fixed income securities
|
$
|
105,651
|
|
|
March 31, 2019
|
||||||||||||||||||||||
|
In Loss Position
Less Than 12 Months
|
|
In Loss Position
Greater Than 12 Months
|
|
Total
|
||||||||||||||||||
|
Value
|
|
Unrealized
Losses
|
|
Value
|
|
Unrealized
Losses
|
|
Value
|
|
Unrealized
Losses
|
||||||||||||
|
|
|
|
|
(In thousands)
|
|
|
|
|
||||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Treasury
|
$
|
6,645
|
|
|
$
|
(188
|
)
|
|
$
|
10,015
|
|
|
$
|
(103
|
)
|
|
$
|
16,660
|
|
|
$
|
(291
|
)
|
Canadian government
|
—
|
|
|
—
|
|
|
17,772
|
|
|
(1,138
|
)
|
|
17,772
|
|
|
(1,138
|
)
|
||||||
Corporate
|
1,643
|
|
|
(3
|
)
|
|
7,262
|
|
|
(253
|
)
|
|
8,905
|
|
|
(256
|
)
|
||||||
Residential mortgage-backed
|
—
|
|
|
—
|
|
|
2,330
|
|
|
(15
|
)
|
|
2,330
|
|
|
(15
|
)
|
||||||
Asset-backed
|
—
|
|
|
—
|
|
|
21
|
|
|
(9
|
)
|
|
21
|
|
|
(9
|
)
|
||||||
Total temporarily impaired fixed income securities
|
$
|
8,288
|
|
|
$
|
(191
|
)
|
|
$
|
37,400
|
|
|
$
|
(1,518
|
)
|
|
$
|
45,688
|
|
|
$
|
(1,709
|
)
|
|
December 31, 2018
|
||||||||||||||||||||||
|
In Loss Position
Less Than 12 Months
|
|
In Loss Position
Greater Than 12 Months
|
|
Total
|
||||||||||||||||||
|
Value
|
|
Unrealized
Losses
|
|
Value
|
|
Unrealized
Losses
|
|
Value
|
|
Unrealized
Losses
|
||||||||||||
|
|
|
|
|
(In thousands)
|
|
|
|
|
||||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Treasury
|
$
|
6,899
|
|
|
$
|
(226
|
)
|
|
$
|
16,374
|
|
|
$
|
(222
|
)
|
|
$
|
23,273
|
|
|
$
|
(448
|
)
|
Canadian government
|
2,254
|
|
|
(9
|
)
|
|
25,330
|
|
|
(1,788
|
)
|
|
27,584
|
|
|
(1,797
|
)
|
||||||
Corporate
|
11,579
|
|
|
(206
|
)
|
|
6,563
|
|
|
(310
|
)
|
|
18,142
|
|
|
(516
|
)
|
||||||
Residential mortgage-backed
|
351
|
|
|
(4
|
)
|
|
3,010
|
|
|
(46
|
)
|
|
3,361
|
|
|
(50
|
)
|
||||||
Asset-backed
|
—
|
|
|
—
|
|
|
79
|
|
|
(11
|
)
|
|
79
|
|
|
(11
|
)
|
||||||
Total temporarily impaired fixed income securities
|
$
|
21,083
|
|
|
$
|
(445
|
)
|
|
$
|
51,356
|
|
|
$
|
(2,377
|
)
|
|
$
|
72,439
|
|
|
$
|
(2,822
|
)
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
Deferred revenue
|
$
|
2,009,467
|
|
|
$
|
1,989,232
|
|
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts
|
(578,078
|
)
|
|
(570,418
|
)
|
||
Deferred revenue, net
|
$
|
1,431,389
|
|
|
$
|
1,418,814
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Beginning balance —
Deferred revenue, net
and
Deferred receipts held in trust
|
$
|
4,790,552
|
|
|
$
|
5,265,206
|
|
Cumulative effect of accounting changes
|
—
|
|
|
37,991
|
|
||
Net preneed contract sales
|
240,388
|
|
|
244,091
|
|
||
(Divestitures) Acquisitions of businesses, net
|
(12,310
|
)
|
|
40,332
|
|
||
Net investment gains (losses)
(1)
|
230,540
|
|
|
(46,918
|
)
|
||
Recognized revenue from backlog
(2)
|
(115,103
|
)
|
|
(115,202
|
)
|
||
Recognized revenue from current period sales
|
(101,242
|
)
|
|
(105,256
|
)
|
||
Change in amounts due on unfulfilled performance obligations
|
(6,178
|
)
|
|
(606,888
|
)
|
||
Change in cancellation reserve
|
148
|
|
|
61,987
|
|
||
Effect of foreign currency and other
|
2,807
|
|
|
(6,517
|
)
|
||
Ending balance —
Deferred revenue, net
and
Deferred receipts held in trust
|
$
|
5,029,602
|
|
|
$
|
4,768,826
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
4.5% Senior Notes due November 2020
|
$
|
200,000
|
|
|
$
|
200,000
|
|
8.0% Senior Notes due November 2021
|
150,000
|
|
|
150,000
|
|
||
5.375% Senior Notes due January 2022
|
425,000
|
|
|
425,000
|
|
||
5.375% Senior Notes due May 2024
|
850,000
|
|
|
850,000
|
|
||
7.5% Senior Notes due April 2027
|
200,000
|
|
|
200,000
|
|
||
4.625% Senior Notes due December 2027
|
550,000
|
|
|
550,000
|
|
||
Term Loan due December 2022
|
632,813
|
|
|
641,250
|
|
||
Bank Credit Facility due December 2022
|
275,000
|
|
|
395,000
|
|
||
Obligations under finance leases
|
193,958
|
|
|
211,952
|
|
||
Mortgage notes and other debt, maturities through 2050
|
24,920
|
|
|
4,076
|
|
||
Unamortized premiums, net
|
6,334
|
|
|
6,562
|
|
||
Unamortized debt issuance costs
|
(30,275
|
)
|
|
(31,762
|
)
|
||
Total debt
|
3,477,750
|
|
|
3,602,078
|
|
||
Less: Current maturities of long-term debt
|
(68,554
|
)
|
|
(69,896
|
)
|
||
Total long-term debt
|
$
|
3,409,196
|
|
|
$
|
3,532,182
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
4.5% Senior Notes due November 2020
|
$
|
199,940
|
|
|
$
|
198,930
|
|
8.0% Senior Notes due November 2021
|
163,665
|
|
|
160,800
|
|
||
5.375% Senior Notes due January 2022
|
427,673
|
|
|
428,188
|
|
||
5.375% Senior Notes due May 2024
|
874,225
|
|
|
851,275
|
|
||
7.5% Senior Notes due April 2027
|
230,000
|
|
|
214,940
|
|
||
4.625% Senior Notes due December 2027
|
550,676
|
|
|
517,077
|
|
||
Term Loan due December 2022
|
632,813
|
|
|
629,579
|
|
||
Bank Credit Facility due December 2022
|
275,000
|
|
|
387,061
|
|
||
Mortgage notes and other debt, maturities through 2050
|
24,920
|
|
|
4,076
|
|
||
Total fair value of debt instruments
|
$
|
3,378,912
|
|
|
$
|
3,391,926
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Revenue from customers:
|
|
|
|
||||
Funeral revenue:
|
|
|
|
||||
Atneed revenue
|
$
|
258,730
|
|
|
$
|
274,499
|
|
Matured preneed revenue
|
156,450
|
|
|
165,329
|
|
||
Core funeral revenue
|
415,180
|
|
|
439,828
|
|
||
Non-funeral home revenue
|
12,973
|
|
|
13,677
|
|
||
Recognized preneed revenue
|
31,325
|
|
|
32,460
|
|
||
Other revenue
|
33,316
|
|
|
28,400
|
|
||
Total funeral revenue
|
492,794
|
|
|
514,365
|
|
||
Cemetery revenue:
|
|
|
|
||||
Atneed revenue
|
81,451
|
|
|
83,044
|
|
||
Recognized preneed property revenue
|
128,612
|
|
|
108,940
|
|
||
Recognized preneed merchandise and services revenue
|
67,039
|
|
|
68,363
|
|
||
Core revenue
|
277,102
|
|
|
260,347
|
|
||
Other revenue
|
28,316
|
|
|
19,770
|
|
||
Total cemetery revenue
|
305,418
|
|
|
280,117
|
|
||
Total revenue from customers
|
$
|
798,212
|
|
|
$
|
794,482
|
|
Operating profit:
|
|
|
|
||||
Funeral operating profit
|
$
|
105,418
|
|
|
$
|
120,455
|
|
Cemetery operating profit
|
86,416
|
|
|
75,307
|
|
||
Operating profit from reportable segments
|
191,834
|
|
|
195,762
|
|
||
General and administrative expenses
|
(42,530
|
)
|
|
(34,784
|
)
|
||
(Losses) gains on divestitures and impairment charges, net
|
(1,878
|
)
|
|
482
|
|
||
Hurricane (expenses) recoveries, net
|
(448
|
)
|
|
2,232
|
|
||
Operating income
|
146,978
|
|
|
163,692
|
|
||
Interest expense
|
(47,390
|
)
|
|
(43,576
|
)
|
||
Loss on early extinguishment of debt, net
|
—
|
|
|
(10,131
|
)
|
||
Other income, net
|
720
|
|
|
384
|
|
||
Income before income taxes
|
$
|
100,308
|
|
|
$
|
110,369
|
|
|
United States
|
|
Canada
|
|
Total
|
||||||
|
|
|
(In thousands)
|
|
|
||||||
Three Months Ended March 31,
|
|
|
|
|
|
||||||
Revenue from external customers:
|
|
|
|
|
|
||||||
2019
|
$
|
754,080
|
|
|
$
|
44,132
|
|
|
$
|
798,212
|
|
2018
|
$
|
744,113
|
|
|
$
|
50,369
|
|
|
$
|
794,482
|
|
|
Operating
|
|
Finance
|
|
Total
|
||||||
2019 (excluding the three months ended March 31, 2019)
|
$
|
8,527
|
|
|
$
|
35,237
|
|
|
$
|
43,764
|
|
2020
|
10,873
|
|
|
41,702
|
|
|
52,575
|
|
|||
2021
|
9,460
|
|
|
59,553
|
|
|
69,013
|
|
|||
2022
|
8,388
|
|
|
23,352
|
|
|
31,740
|
|
|||
2023
|
6,241
|
|
|
16,569
|
|
|
22,810
|
|
|||
Thereafter
|
43,574
|
|
|
39,990
|
|
|
83,564
|
|
|||
Total lease payments
|
$
|
87,063
|
|
|
$
|
216,403
|
|
|
$
|
303,466
|
|
Less: Interest
|
(23,373
|
)
|
|
(22,445
|
)
|
|
(45,818
|
)
|
|||
Present value of lease liabilities
|
$
|
63,690
|
|
|
$
|
193,958
|
|
|
$
|
257,648
|
|
|
Operating
|
|
Finance
|
||||
2019
|
$
|
11,295
|
|
|
$
|
46,998
|
|
2020
|
9,550
|
|
|
51,943
|
|
||
2021
|
8,251
|
|
|
57,881
|
|
||
2022
|
7,282
|
|
|
21,842
|
|
||
2023
|
5,397
|
|
|
15,587
|
|
||
2024 and thereafter
|
37,841
|
|
|
40,447
|
|
||
Total
|
$
|
79,616
|
|
|
$
|
234,698
|
|
Less: Interest on finance leases
|
|
|
(22,746
|
)
|
|||
Total principal payable on finance leases
|
|
|
$
|
211,952
|
|
2019 (excluding the three months ended March 31, 2019)
|
$
|
1,949
|
|
2020
|
1,660
|
|
|
2021
|
1,312
|
|
|
2022
|
996
|
|
|
2023
|
426
|
|
|
Thereafter
|
94
|
|
|
Total cash receipts
|
$
|
6,437
|
|
Amortization of leased assets
|
$
|
10,964
|
|
Interest on lease liabilities
|
1,831
|
|
|
Total finance lease cost
|
12,795
|
|
|
Operating lease cost
|
3,194
|
|
|
Variable lease cost
|
372
|
|
|
Total lease cost
|
$
|
16,361
|
|
Lease Type
|
|
Balance Sheet Classification
|
|
Amounts Recognized
|
||
Operating lease right-of-use assets
(1)
|
|
Deferred charges and other assets
|
|
$
|
61,432
|
|
Finance lease right-of-use assets
(1)
|
|
Property and equipment, net
|
|
187,088
|
|
|
Total right-of-use assets
(1)
|
|
|
|
$
|
248,520
|
|
|
|
|
|
|
||
Operating
|
|
Accounts payable and accrued liabilities
|
|
$
|
8,584
|
|
Finance
|
|
Current maturities of long-term debt
|
|
39,619
|
|
|
Total current lease liabilities
|
|
|
|
48,203
|
|
|
Operating
|
|
Other liabilities
|
|
55,106
|
|
|
Finance
|
|
Long-term debt
|
|
154,339
|
|
|
Total non-current lease liabilities
|
|
|
|
209,445
|
|
|
Total lease liabilities
|
|
|
|
$
|
257,648
|
|
|
Operating
|
|
Finance
|
||
Weighted-average remaining lease term (years)
|
12.2
|
|
|
4.9
|
|
Weighted-average discount rate
|
4.8
|
%
|
|
3.4
|
%
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands, except per share amounts)
|
||||||
Amounts attributable to common stockholders:
|
|
|
|
||||
Net income:
|
|
|
|
||||
Net income — basic
|
$
|
79,323
|
|
|
$
|
81,988
|
|
After tax interest on convertible debt
|
—
|
|
|
15
|
|
||
Net income — diluted
|
$
|
79,323
|
|
|
$
|
82,003
|
|
Weighted average shares (denominator):
|
|
|
|
||||
Weighted average shares — basic
|
181,696
|
|
|
185,130
|
|
||
Stock options
|
3,562
|
|
|
4,522
|
|
||
Restricted stock units
|
59
|
|
|
150
|
|
||
Convertible debt
|
—
|
|
|
121
|
|
||
Weighted average shares — diluted
|
185,317
|
|
|
189,923
|
|
||
Net income per share:
|
|
|
|
||||
Basic
|
$
|
0.44
|
|
|
$
|
0.44
|
|
Diluted
|
$
|
0.43
|
|
|
$
|
0.43
|
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2019
|
|
2018
|
||
|
(In thousands)
|
||||
Antidilutive options
|
—
|
|
|
577
|
|
Antidilutive restricted stock units
|
37
|
|
|
—
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Gains on divestitures, net
|
$
|
546
|
|
|
$
|
1,276
|
|
Impairment losses
|
(2,424
|
)
|
|
(794
|
)
|
||
(Losses) gains on divestitures and impairment charges, net
|
$
|
(1,878
|
)
|
|
$
|
482
|
|
|
Per Credit Agreement
|
|
Actual
|
Leverage ratio
|
4.50 (Max)
|
|
3.83
|
Interest coverage ratio
|
3.00 (Min)
|
|
4.90
|
•
|
a
$11.9 million
decrease in cash receipts from customers,
|
•
|
a
$1.8 million
decrease in General Agency (GA) and other receipts,
|
•
|
a
$8.9 million
increase in net trust deposits, and
|
•
|
a
$0.1 million
increase in employee compensation, partially offset by
|
•
|
a
$0.4 million
decrease in vendor and other payments, and
|
•
|
a
$1.3 million
decrease in cash tax payments.
|
•
|
a
$5.3 million
increase in capital expenditures primarily due to improvements at existing funeral homes, and
|
•
|
a
$1.5 million
increase in payments on Company-owned life insurance policies, net of proceeds.
|
•
|
a
$48.4 million
decrease in proceeds from the issuance of debt, net of payments, and
|
•
|
a
$1.5 million
increase in payments of dividends.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In millions)
|
||||||
Preneed funeral
|
$
|
102.3
|
|
|
$
|
106.9
|
|
Preneed cemetery:
|
|
|
|
||||
Merchandise and services
|
138.4
|
|
|
137.9
|
|
||
Pre-construction
|
16.2
|
|
|
15.4
|
|
||
Bonds supporting preneed obligations
|
256.9
|
|
|
260.2
|
|
||
Bonds supporting preneed business permits
|
4.7
|
|
|
4.2
|
|
||
Other bonds
|
18.9
|
|
|
18.9
|
|
||
Total surety bonds outstanding
|
$
|
280.5
|
|
|
$
|
283.3
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Preneed insurance-funded:
|
|
|
|
||||
Sales production
(1)
|
$
|
134.8
|
|
|
$
|
126.6
|
|
Sales production (number of contracts)
(1)
|
23,799
|
|
|
21,589
|
|
||
General agency revenue
|
$
|
36.0
|
|
|
$
|
31.5
|
|
Maturities
|
$
|
90.4
|
|
|
$
|
96.4
|
|
Maturities (number of contracts)
|
15,472
|
|
|
16,231
|
|
(1)
|
Amounts are not included in our unaudited Condensed Consolidated Balance Sheet.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Funeral:
|
|
|
|
||||
Preneed trust-funded (including bonded):
|
|
|
|
||||
Sales production
|
$
|
94.5
|
|
|
$
|
92.7
|
|
Sales production (number of contracts)
|
25,327
|
|
|
25,873
|
|
||
Maturities
|
$
|
73.8
|
|
|
$
|
77.1
|
|
Maturities (number of contracts)
|
18,844
|
|
|
19,661
|
|
||
Cemetery:
|
|
|
|
||||
Sales production:
|
|
|
|
||||
Preneed
|
$
|
216.7
|
|
|
$
|
201.5
|
|
Atneed
|
82.0
|
|
|
85.1
|
|
||
Total sales production
|
$
|
298.7
|
|
|
$
|
286.6
|
|
Sales production deferred to backlog:
|
|
|
|
||||
Preneed
|
$
|
93.9
|
|
|
$
|
97.2
|
|
Atneed
|
60.8
|
|
|
63.3
|
|
||
Total sales production deferred to backlog
|
$
|
154.7
|
|
|
$
|
160.5
|
|
Revenue recognized from backlog:
|
|
|
|
||||
Preneed
|
$
|
63.2
|
|
|
$
|
57.0
|
|
Atneed
|
59.6
|
|
|
60.9
|
|
||
Total revenue recognized from backlog
|
$
|
122.8
|
|
|
$
|
117.9
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||
|
Fair Value
|
|
Cost
|
|
Fair Value
|
|
Cost
|
||||||||
|
|
|
(In billions)
|
|
|
||||||||||
Deferred revenue, net
|
$
|
1.43
|
|
|
$
|
1.43
|
|
|
$
|
1.42
|
|
|
$
|
1.42
|
|
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts
|
0.58
|
|
|
0.58
|
|
|
0.57
|
|
|
0.57
|
|
||||
Deferred receipts held in trust
|
3.60
|
|
|
3.46
|
|
|
3.37
|
|
|
3.47
|
|
||||
Allowance for cancellation
|
(0.26
|
)
|
|
(0.24
|
)
|
|
(0.24
|
)
|
|
(0.25
|
)
|
||||
Backlog of trust-funded deferred revenue, net of estimated allowance for cancellation
|
$
|
5.35
|
|
|
$
|
5.23
|
|
|
$
|
5.12
|
|
|
$
|
5.21
|
|
Backlog of insurance-funded deferred revenue
(1)
|
6.04
|
|
|
6.04
|
|
|
5.97
|
|
|
5.97
|
|
||||
Total backlog of deferred revenue
|
$
|
11.39
|
|
|
$
|
11.27
|
|
|
$
|
11.09
|
|
|
$
|
11.18
|
|
Preneed receivables, net and trust investments
|
$
|
4.50
|
|
|
$
|
4.36
|
|
|
$
|
4.27
|
|
|
$
|
4.37
|
|
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts
|
0.58
|
|
|
0.58
|
|
|
0.57
|
|
|
0.57
|
|
||||
Allowance for cancellation on trust investments
|
(0.26
|
)
|
|
(0.24
|
)
|
|
(0.24
|
)
|
|
(0.25
|
)
|
||||
Assets associated with backlog of trust-funded deferred revenue, net of estimated allowance for cancellation
|
$
|
4.82
|
|
|
$
|
4.70
|
|
|
$
|
4.60
|
|
|
$
|
4.69
|
|
Insurance policies associated with insurance-funded deferred revenue
(1)
|
6.04
|
|
|
6.04
|
|
|
5.97
|
|
|
5.97
|
|
||||
Total assets associated with backlog of preneed deferred revenue
|
$
|
10.86
|
|
|
$
|
10.74
|
|
|
$
|
10.57
|
|
|
$
|
10.66
|
|
(1)
|
Amounts are not included in our unaudited Condensed Consolidated Balance Sheet.
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Pre-tax (losses) gains from divestitures and impairment charges, net
|
$
|
(1.9
|
)
|
|
$
|
0.5
|
|
Pre-tax losses from the early extinguishment of debt, net
|
$
|
—
|
|
|
$
|
(10.1
|
)
|
Legal matters
|
$
|
(8.0
|
)
|
|
$
|
—
|
|
Tax benefit from above items
|
$
|
2.5
|
|
|
$
|
1.5
|
|
Change in certain tax reserves and other
|
$
|
—
|
|
|
$
|
1.2
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(Dollars in millions, except average revenue per service)
|
||||||
Consolidated funeral revenue
|
$
|
492.8
|
|
|
$
|
514.4
|
|
Less: revenue associated with acquisitions/new construction
|
8.5
|
|
|
0.3
|
|
||
Less: revenue associated with divestitures
|
0.4
|
|
|
1.8
|
|
||
Comparable
(1)
funeral revenue
|
483.9
|
|
|
512.3
|
|
||
Less: comparable recognized preneed revenue
|
30.8
|
|
|
32.5
|
|
||
Less: comparable general agency and other revenue
|
33.1
|
|
|
28.3
|
|
||
Adjusted comparable funeral revenue
|
$
|
420.0
|
|
|
$
|
451.5
|
|
Comparable services performed
|
81,095
|
|
|
85,991
|
|
||
Comparable average revenue per service
(2)
|
$
|
5,179
|
|
|
$
|
5,251
|
|
|
|
|
|
||||
Consolidated funeral operating profit
|
$
|
105.4
|
|
|
$
|
120.5
|
|
Less: operating profit (loss) associated with acquisitions/new construction
|
0.6
|
|
|
(0.2
|
)
|
||
Less: operating loss associated with divestitures
|
—
|
|
|
(1.1
|
)
|
||
Comparable
funeral operating profit
|
$
|
104.8
|
|
|
$
|
121.8
|
|
(1)
|
We define comparable (or same store) operations as those funeral service locations owned by us for the entire period beginning
January 1, 2018
and ending
March 31, 2019
.
|
(2)
|
We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding recognized preneed revenue, general agency revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of services performed during the period. Recognized preneed revenue are preneed sales of merchandise that are delivered at the time of sale, including memorial merchandise and travel protection, net and are excluded from our calculation of comparable average revenue per service because the associated service has not yet been performed.
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Consolidated cemetery revenue
|
$
|
305.4
|
|
|
$
|
280.1
|
|
Less: revenue associated with acquisitions
|
4.5
|
|
|
—
|
|
||
Less: revenue associated with divestitures
|
0.1
|
|
|
0.2
|
|
||
Comparable
(1)
cemetery revenue
|
$
|
300.8
|
|
|
$
|
279.9
|
|
|
|
|
|
||||
Consolidated cemetery operating profit
|
$
|
86.4
|
|
|
$
|
75.3
|
|
Less: operating profit associated with acquisitions
|
—
|
|
|
—
|
|
||
Less: operating loss associated with divestitures
|
(0.1
|
)
|
|
—
|
|
||
Comparable cemetery operating profit
|
$
|
86.5
|
|
|
$
|
75.3
|
|
(1)
|
We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning
January 1, 2018
and ending
March 31, 2019
.
|
•
|
Our affiliated funeral and cemetery trust funds own investments in securities, which are affected by market conditions that are beyond our control.
|
•
|
We may be required to replenish our affiliated funeral and cemetery trust funds to meet minimum funding requirements, which would have a negative effect on our earnings and cash flow.
|
•
|
Our ability to execute our strategic plan depends on many factors, some of which are beyond our control.
|
•
|
Our credit agreements contain covenants that may prevent us from engaging in certain transactions.
|
•
|
If we lost the ability to use surety bonding to support our preneed funeral and preneed cemetery activities, we may be required to make material cash payments to fund certain trust funds.
|
•
|
The funeral and cemetery industry is competitive.
|
•
|
Increasing death benefits related to preneed contracts funded through life insurance or annuity contracts may not cover future increases in the cost of providing a price-guaranteed service.
|
•
|
The financial condition of third-party insurance companies that fund our preneed contracts may impact our future revenue.
|
•
|
Unfavorable results of litigation could have a material adverse impact on our financial statements.
|
•
|
Unfavorable publicity could affect our reputation and business.
|
•
|
If the number of deaths in our markets decline, our cash flows and revenue may decrease.
|
•
|
If we are not able to respond effectively to changing consumer preferences, our market share, revenue, cash flows, and/or profitability could decrease.
|
•
|
The continuing upward trend in the number of cremations performed in North America could result in lower revenue, operating profit, and cash flows.
|
•
|
Our funeral home and cemetery businesses are high fixed-cost businesses.
|
•
|
Regulation and compliance could have a material adverse impact on our financial results.
|
•
|
Cemetery burial practice claims could have a material adverse impact on our financial results.
|
•
|
We use a combination of insurance, self-insurance, and large deductibles in managing our exposure to certain inherent risks, therefore, we could be exposed to unexpected costs that could negatively affect our financial performance.
|
•
|
A number of years may elapse before particular tax matters, for which we have established accruals, are audited and finally resolved.
|
•
|
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows.
|
•
|
Declines in overall economic conditions beyond our control could reduce future potential earnings and cash flows and could result in future impairments to goodwill and/or other intangible assets.
|
•
|
Any failure to maintain the security of the information relating to our customers, their loved ones, our associates, and our vendors could damage our reputation, could cause us to incur substantial additional costs and to become subject to litigation, and could adversely affect our operating results, financial condition, or cash flow.
|
•
|
Our Canadian business exposes us to operational, economic, and currency risks.
|
•
|
Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and may prevent us from fulfilling our obligations under our indebtedness.
|
•
|
A failure of key information technology systems or processes could disrupt and adversely affect our business.
|
•
|
Failure to maintain effective internal control over financial reporting could adversely affect our results of operations, investor confidence, and our stock price.
|
•
|
The application of unclaimed property laws by certain states to our preneed funeral and cemetery backlog could have a material adverse impact on our liquidity, cash flows, and our financial results.
|
Period
|
|
Total number of shares purchased
|
|
Average price paid per share
|
|
Total number of shares purchased as part of publicly announced programs
|
|
Dollar value of shares that may yet be purchased under the program
|
||||||
January 1, 2019 - January 31, 2019
(1)
|
|
231,684
|
|
|
$
|
40.70
|
|
|
193,395
|
|
|
$
|
184,676,490
|
|
February 1, 2019 - February 28, 2019
|
|
600
|
|
|
$
|
41.92
|
|
|
600
|
|
|
$
|
184,651,338
|
|
March 1, 2019 - March 31, 2019
(1)
|
|
122,613
|
|
|
$
|
39.86
|
|
|
99,977
|
|
|
$
|
180,666,154
|
|
|
|
354,897
|
|
|
|
|
293,972
|
|
|
|
|
|
|
|||
|
|
|
|||
|
|
—
|
|
||
|
|
—
|
|
||
|
|
—
|
|
||
|
|
—
|
|
||
101
|
|
|
—
|
|
Interactive data file.
|
April 25, 2019
|
|
SERVICE CORPORATION INTERNATIONAL
|
|
By:
|
/s/ Tammy Moore
|
|
|
Tammy Moore
|
|
|
Vice President and Corporate Controller
(Principal Accounting Officer)
|
1.
|
Section 1.7, Beneficiary Designation Form is amended in its entirety to read as follows:
|
2.
|
Section 1.25, Election Form is amended in its entirety to read as follows:
|
3.
|
Section 1.36, Plan Agreement is amended in its entirety to read as follows:
|
4.
|
Section 19.2(b), Unit Deferral Elections is amended in its entirety to read as follows:
|
1.
|
Grant of Award
.
|
A.
|
Definitions
. For purposes of this Award, the following definitions will control:
|
•
|
“Annualized ROE” means the product of (i) the sum of the Return on Equity for each fiscal year during the Performance Cycle, divided by (ii) three.
|
•
|
“Award” is a grant of Units as approved by the Compensation Committee. The number Units subject to the Award shall be increased, as provided in Section 1(c) of the Agreement, to reflect the deemed reinvestment of dividends during the Performance Cycle.
|
•
|
“Comparator Group” is defined as the publicly traded U.S. companies which are included in the reference group as documented in the 2019 Compensation Committee’s records and which are in existence at the end of the Performance Cycle.
|
•
|
“Compensation Committee” means the Compensation Committee of the Board of Directors of Service Corporation International.
|
•
|
“IRC §409A” means Section 409A of the Internal Revenue Code of 1986, as amended.
|
•
|
“National Exchange” is defined as the New York Stock Exchange (NYSE) or the National Association of Stock Dealers and Quotes (NASDAQ).
|
•
|
“Plan Administrator” is Compensation Committee, which may delegate certain elements of administrative responsibility to the Company’s CEO or appropriate members of his staff. Any performance goals, performance standards and award determinations must be approved by the Compensation Committee.
|
•
|
“Performance Cycle” is defined as the three-year period beginning December 31, 2018 and ending December 31, 2021.
|
•
|
“Performance Settlement Factor” is the applicable percentage set forth in Section B below, which shall be applied to the number of vested units based on the Company’s relative TSR ranking within the Comparator Group, as interpolated.
|
•
|
“Return on Equity” shall be calculated for each fiscal year during the Performance Cycle by dividing (i) the Company’s consolidated net income from continuing operations of the Company, as determined under U.S. Generally Accepted Accounting Principles, for the fiscal year, by (ii) the average of the beginning and ending stockholders equity for such fiscal year.
|
•
|
“Total Shareholder Return” (TSR) is defined as the rate of return reflecting stock price appreciation plus reinvestment of dividends over the Performance Cycle. Specifically, TSR will be calculated using the following provisions: $100 invested in SCI stock on the first day of the Performance Cycle, with dividends reinvested on each applicable payment date, compared to $100 invested in each of the peer companies in the Comparator Group, with dividend reinvestment on each applicable payment date during the same period. For purposes of this calculation, any determination of reinvested dividends shall be calculated as the sum of the total dividends paid on one share of stock during the Performance Cycle, assuming reinvestment of such dividends in such stock (based on the closing stock price of such stock on the
|
•
|
“Unit” is a performance unit which shall have a value equal to the closing price of a share of the Company’s common stock.
|
B.
|
Performance Unit Awards Settlement Criteria
:
|
SCI Weighted Average Total Shareholder Return Ranking Relative to Comparator Group at End of Performance Cycle
|
Ranking
|
% of Target Award Paid as Incentive
(Performance Settlement Factor)
|
Maximum
|
75
th
% or greater
|
200%
|
|
70
th
%ile
|
180%
|
|
65
th
%ile
|
160%
|
|
60
th
%ile
|
140%
|
|
55
th
%ile
|
120%
|
Target
|
50
th
%ile
|
100%
|
|
45
th
%ile
|
85%
|
|
40
th
%ile
|
70%
|
|
35
th
%ile
|
55%
|
|
30
th
%ile
|
40%
|
Threshold
|
25
th
%ile
|
25%
|
Below Threshold
|
Less than 25
th
%ile
|
0%
|
•
|
Calculation of awards for performance levels between Target and Maximum, or Threshold and Target will be calculated using straight-line interpolation.
|
•
|
If mergers and acquisitions result in a reduction in the number of peer group companies during the cycle, these percentile rankings will reflect the Comparator Group companies still intact at the end of the Performance Cycle.
|
•
|
As provided in Section 8(a) of the Agreement, in the event SCI’s TSR is negative at the end of the Performance Cycle, no payment hereunder will exceed the Target in the schedule above.
|
•
|
As provided in Section 8(c) of the Agreement, in the event SCI’s Annualized ROE for the Performance Cycle is less than fifteen percent (15%), as calculated at the end of the Performance Cycle, the amount payable in settlement of the Units shall be reduced by twenty-five percent (25%).
|
•
|
The Compensation Committee shall have the reasonable discretion to interpret or construe ambiguous, unclear or implied terms applicable to this Agreement, and to make any findings of fact necessary to make a calculation or determination hereunder.
|
•
|
A decision made in good faith by the Compensation Committee shall govern and be binding in the event of any dispute regarding a method of calculation of performance or a determination of vesting or forfeiture in connection with the Award or this Agreement.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Service Corporation International, a Texas corporation (the “registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
April 25, 2019
|
/s/ Thomas L. Ryan
|
|
|
Thomas L. Ryan
President, Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Service Corporation International, a Texas corporation (the “registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
April 25, 2019
|
/s/ Eric D. Tanzberger
|
|
|
Eric D. Tanzberger
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
(1)
|
the Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2019
(the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Service Corporation International.
|
Dated:
|
April 25, 2019
|
/s/ Thomas L. Ryan
|
|
|
Thomas L. Ryan
President, Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
|
(1)
|
the Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2019
(the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Service Corporation International.
|
Dated:
|
April 25, 2019
|
/s/ Eric D. Tanzberger
|
|
|
Eric D. Tanzberger
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|